Investors mob holiday parks, sparking sharp asset price rises

“We are seeing a number of newer players trying to get into the industry, with varying degrees of success, and assets selling at values that we wouldn’t have thought possible only a few years ago,” said Angus Strachan, director of business services at BDO, an industry financial advisory firm.

Mr Strachan cited one recent sale of a NSW coastal park for $16 million which was officially valued at $8 million 18 months ago.

“Now I would imagine there’s an element of the valuer being conservative, but there was another offer not too far away from that valuation made just before,” Mr Strachan said.

“I’m not saying prices have doubled across the board, absolutely not, but there are isolated examples of some parks’ value going up by millions of dollars in a short period of time.”

He said the major investors were a mix of holiday park and over-50s lifestyle operators such as Ingenia, Aspen, G’Day Parks, GemLife, NRMA, Tasman, National Lifestyle Villages and Hampshire Property Group.

They are competing with syndicators and private equity for prime parks, forcing up prices, which in turn is prompting an increasing number of operators testing the market.

BDO says it is working on 15 transactions, while ResortBrokers has sold four parks in the past three weeks for $22 million, and has another five parks under contract worth another $34 million.

Greg James from ResortBrokers said the NSW north coast market had been running hot with yields for quality holiday parks almost halving from 12 per cent to 7 per cent.

“It’s tightened up that much, they’ve become such a highly sought-after asset class,” Mr James said. “There are more buyers in the market and good parks are very difficult to get.”

For the corporates Mr James said it was all about “scale and numbers, rather than experiences, which some other buyers are looking for because it’s a very lucrative market as well.”

Prices for quality parks had increased by up to 50 per cent in the past 18 months at an average of more than 30 per cent.

Michael Philpott, a director at Tourism Brokers, said investor demand was primarily for coastal locations but key regional properties were performing well due to improved business performance.

Turnover was up by 15 per cent to 20 per cent in non-lockdown regional areas.

“Everyone wants to be on the coast. They’re the ones that have really gone up astronomically in value,” Mr Philpott said.

“We’ve seen some sales where cap rates have gone down to 4 per cent. If you’ve got some additional land you can open up and develop.

“It’s quite common to see 8 per cent to 10 per cent cap rates for operational parks.”

He said supply had been an issue. “A lot of the traditional caravan parks have been taken out of the marketplace because they have been converted to MHEs.

“So you’ve a shortage of stock and this has put more and more pressure on.